Has Oakland’s Fruitvale Neighborhood Ever Recovered From ‘Redlining’?
By Erika Kelly and Brian Watt
9 February 2018
Photo courtesy of KQED News
The Trump administration has recently focused on revising the Community Reinvestment Act, a 40-year-old law aimed at encouraging banks to invest in low-income communities. The goal of CRA was to meet the credit needs of low- and moderate-income communities by reducing discriminatory credit practices.
“It may be one of the most impactful laws people have never heard of,” says Kevin Stein, deputy director of the California Reinvestment Coalition. By his estimates, the CRA has resulted in billions of dollars in loans, investments and financial services for low-income communities and communities of color.
The origins of the CRA come from the years following the Great Depression. The federal government wanted to reinvigorate homeownership in regions that had experienced large-scale foreclosures. To achieve this, the government established the Home Owners’ Loan Corporation to refinance mortgages at risk of default. A component of HOLC included creating maps of cities in which certain regions were characterized as good investments or bad investments.
Neighborhoods were assigned a grade based on the favorable and unfavorable influences associated with the area. Communities with high concentrations of non-whites were often dubbed unfavorable. For example, in Oakland’s Fruitvale district, HOLC determined the negative influences to be, “Odors from industries. Predominance of foreign inhabitants. Infiltration of Negroes and Orientals.”
Fruitvale and other neighborhoods alike were colored red on maps for being unfavorable. Thus, the term “redlining” emerged.
“These neighborhoods were denied access to credit because the federal government refused to guarantee mortgages and other loans that were being made in these neighborhoods,” said Carolina Reid, assistant professor in the Department of City and Regional Planning at UC Berkeley’s College of Environmental Design.
Reid asserts that the redlining of the 1930s has lasting repercussions. “The policy of redlining helped facilitate the disinvestment and the growing poverty in neighborhoods like Fruitvale,” Reid said. “Because we saw white flight to the suburbs and then we saw families that were remaining not being able to access credit to buy a home or to invest in a small business.”
Following waves of activism in the 1960s and 1970s, the CRA was enacted. Although the act does not explicitly outlaw discrimination and redlining, it requires that banks offer the same loans and financial services to all communities, regardless of neighborhood income.
In Oakland, for example, the nonprofit Unity Council is collaborating with communities to find innovative investment opportunities. With investment from banks, the Unity Council built Fruitvale Village, the transit village adjacent to the Fruitvale BART Station. It includes 47 units of housing, restaurants, businesses and a bank branch.
In return for investing in lower-income communities, banks receive credit for complying with the CRA — and locations like Fruitvale are now seen as good investments by banks. The CRA has also prompted the development of new community services for people within the neighborhood.
Despite the apparent benefits, critics of the CRA point to the persistence of discriminatory lending practices and the crippling affordable housing shortage in the Bay Area. Given the Trump administration's affinity for deregulation, the CRA may not be around long enough to see improvements.
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